Economic Data Tracker – 
Quarter point rate cut by Fed still likely next week

Trend watch

Note: As always, there is a separate Economic Commentary discussing the monthly jobs report, which will be published on November 1st.

Air passenger traffic fell sharply this week, down 7.7% week over week to 16.5 million for the prior 7 days. That’s a fairly typical seasonal pattern as the calendar flips to November, the size of the week-over-week decline was larger due to the late October surge we noted previously.

Meanwhile, we are seeing the hurricanes’ impact rippling through the activity-based data (slides 5 and 6) – first down then upward as rebuilding ramps up. That will continue over the next few weeks and months in both directions. 

What’s new this week

• U.S. economy grew a solid 2.8% in 3Q24 (slide 7).
• The consumer – over 2/3rds of the U.S. economy – remains solid (slide 8).
• The Fed’s favorite inflation gauge continues cooling (slide 9).
• ISM manufacturing index dropped to 16-month low, while price paid climbed (slide 10).
• Job openings down but hiring up in September, while quit rate drops again (slide 11).
• Jobless claims hanging around pre-pandemic averages (slide 12).
• Big 4 indicators point toward continued growth for U.S. economy (slide 13)
• New durable goods orders down but core orders hit new high in September (slide 14).

Our take

The proverbial black cat has crossed our path. A couple hurricanes and a pair of machinists strikes at aircraft makers have clouded the near-term economic view. That was certainly the case for the October jobs report.

Aside from that report, most of the other incoming economic data – from retail sales and personal incomes to durable goods orders and the activity-based indicators – reflect a U.S. economy that’s doing just fine. It’s also been reinforced by weekly jobless claims, which have completely recovered in the weeks following the hurricanes.

Still, the most important immediate question is “how will the Federal Reserve (Fed) react to these distortions?” There are no major data releases before next week’s November Fed meeting.

Of course, there’s also the ongoing distraction from next week’s election, which may or may not be fully resolved by the Fed announcement on Thursday. In fact, given some rule changes due to the 2022 Electoral Count Reform Act and state-level legislation – including some states now requiring poll watchers, along with mandating recounts for close results, etc. – its very likely official results may take a few days.

Nonetheless, we expect that the Fed will put the clouded jobs report in the proper context and the nation should have a good sense of the election outcome.

As we noted previously, most of the recent incoming data appears solid, which is paired with continued cooling by inflation gauges. Thus, we believe the Fed will stay on track for a quarter point (0.25%) rate cut at the November meeting.

Looking ahead though, it remains to be seen whether the Fed will follow through with an additional quarter point rate cut at the December meeting, which we previously expected. Ultimately, a December rate cut will depend on the strength of the data between now and then.

Bottom line

The U.S. economy remains resilient, albeit with uneven growth. It’s certainly not weak, especially when compared to pre-pandemic figures. While the Federal Reserve has begun lowering interest rates to support economic growth, the process of normalizing rates has just started and will take time to unfold.